The market action has calmed down considerable today as the frenzy over the Gilead (GILD) coronavirus treatment and the never-ending support of the Federal Reserve has cooled off.
Small caps (IWM) are weak and that is reflected in breadth which is running about 1800 gainers to 5300 decliners. There are only about 20 stocks at all-time highs which shows that even with a monster rally, stocks still are not back to where they were in February.
I've been a seller for the last few days and my cash position is now close to 90%. My strategy here is to focus on shorter-term trades. I still see no reason to believe that it is time to build long term positions.
Many market players seem to believe that the worst is over and that the market will pretty much recover in a straight line from here primarily due to the power of the Fed. Maybe, but I don't think it will be that simple and I am looking for some struggles as we deal with the economic struggles of the next few months. This economy is never going to be quite the same again but there is going to be some interesting winners and losers as things develop.
The Work-from-Home theme is likely to be one of the winners no matter what happens and I am inclined to build Slack (WORK) as opportunities arise.
I believe that the best approach to this market in the near term is to focus primarily on sector plays and good chart patterns. There are many hopeful folks that believe that the Fed is going to keep this market running steadily higher but I believe they have been misled by the very lopsided price action that produced six straight gap-up opens. The Fed is going to be important but I am looking for more natural price action to develop as we head into May.